How the Russia-Ukraine spat is impacting oil forecasts

The fallout from the diplomatic dispute between Russia and neighboring Ukraine will continue to affect the oil price for months, according to the International Energy Agency.

Demand for oil around the world is likely to be slightly lower than forecast this year, owing to less demand from Russia as its economic growth slows by more than expected following the Ukraine contretemps, the agency said in its monthly report. It has cut its expectations for global demand growth this year to 1.3 million barrels per day.

An oil storage tank at the Salym Petroleum oil fields near the Bazhenov shale formation in Salym, Russia.

There is expected to be more demand from some of the Asian economies than expected, which will help counter the fall in Russian demand. The agency has not yet factored in the potential effects of economic sanctions by the West against Russia if it makes further incursions across Ukrainian borders, and warned that its forecasts could need further changes. Following the annexation of Crimea, authorities including the International Monetary Fund and World Bank have cut their forecasts for Russian growth in 2014.

The cost of oil, as measured by Brent crude, moved dramatically in early March around the initial stages of the dispute over Crimea, but soon stabilized and started April at $107.66, down less than $2 from the start of March.

Supply problems in the Middle East, the source of much of the world's oil, also helped support prices despite seasonally weaker demand. Global supplies of oil plunged by 1.2 million barrels per day to 91.75 million barrels per day during March as a result.

A harsh winter in the U.S. boosted demand for domestic fuel, but also meant that less oil was used for business and transportation.